William and Carla file a joint tax return. Carla earned $26,000 during the year, while William attended law school full-time for 10 months and earned no income. They paid $3,500 for the care of their 3-year-old child, Carl.
Calculate the amount of the child and dependent care credit allowed for 2015 in each of the following cases, assuming the taxpayers had no income other than the stated amounts.

PART A - Calculate the total expense limitation as follows:

Total expense limitation = Maximum limit for one dependent child × Number of months

Total expense limitation = 250 × 10

Total expense limitation = $2500

Therefore, the total expense limitation is $2,500.

Explanation  

Maximum limit for one dependent child is $250 and number of months is 10 months. Total expense limitation is calculated by multiplying the maximum limit for one dependent child with the number of months. Hence, the total expense limitation is $2,500.

PART B - Determine the maximum amount of the qualifying expense:

Maximum amount of the qualifying expense = Total expense limitation × Rate

Maximum amount of the qualifying expense = $2,500 × 29%

Maximum amount of the qualifying expense = $725

Therefore, the maximum amount of the qualifying expense is $725.

Note:

The maximum limit for qualifying expense is 29%.

Maximum amount of the qualifying expense is $725.

Explanation  

Calculated total expense limitation is $2,500 and the rate for 2015 is 29%. Maximum amount of the qualifying expense is 29% of the total expense limitation $2,500. Hence, the maximum amount of the qualifying expense is $725.

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